Statistics Canada has just released its monthly labour force report for April. It’s the first monthly release that captures the full extent of the COVID-19 shutdowns; the previous report reflected only the initial stages of pandemic-related closures. By the time Statistics Canada did its April survey (during the week of April 12 to 18), millions of workers had stopped working. 

Not surprisingly, the numbers are grim. 2.4 million Canadians were counted as officially unemployed in April. That’s 13.0% of the labour force — bad by any definition. However, that statistic is only the tip of the iceberg. In fact, the ‘official’ unemployment rate has never been a worse indicator of true unemployment. It doesn’t remotely portray the full extent of nonemployment experienced by Canadians, as the pandemic and emergency closures took hold.

To be considered as unemployed in the official statistics, someone has to jump several hurdles. They can’t hold any ‘job’: even if it’s a job where they didn’t work in the week of the survey. Even working one hour in the week when the Statistics Canada survey is conducted is enough to qualify as ‘working.’ And if they don’t have a job, they have to be willing to work, available to work if a job becomes available and actively seeking work. Moreover, to satisfy Statistics Canada’s definition of ‘active search,’ you must be putting in several active applications every week.

Those strict statistical definitions reflect a rather old-fashioned and somewhat punitive conception of unemployment. Many policy-makers (traditionally including central bankers) are predisposed to discount the extent and consequences of unemployment; they are more preoccupied with other priorities, like suppressing inflation and reducing expenses for employment insurance and other social programs. For them consistently underestimating the true extent of un-utilized potential in the economy is politically convenient.Yes, 13.0% official unemployment is horrible. But true unemployment in April was 2.5 times higher. That’s a catastrophic level. 

Let’s walk through the numbers:

In addition to 2.4 million officially unemployed, there were another 2.4 million Canadians who reported being ‘employed’ in April, but who didn’t work at all. Millions of workers have been sent away from their jobs because there was nothing to do, but have not yet been formally let go. (Hopefully the Canadian Emergency Response Benefit and other government aid will prevent some of those looming layoffs.) Over 80% of those who were ‘employed’ but not working (1.9 million) did not get paid. About 40% of those were self-employed — most of whom have no way to get paid if they stop actively working. If we include Canadians employed but not working and not paid, the unemployment rate jumps by over 10 percentage points, to 23.4%.

But there’s more. Another 1.1 million Canadians didn’t work, had recently worked, and wanted to work — but they did not ‘actively’ seek it. But what’s the point of looking for something that doesn’t exist? Adjust both unemployment and the labour force for that group, and the unemployment rate jumps again: to 27.7%.

Finally, we should also include workers who lost most but not all of their hours, and other involuntary part-time workers. Remember, if you work just a single hour, then you are ‘employed.’ But that’s a ridiculous way to measure work — especially given the rise of part-time work, irregular hours, and precarious jobs. We can count their involuntary hours of nonemployment on a full-time-equivalent basis. That takes unemployment to over 30%.

This implies that Canada is already experiencing Depression-level unemployment. The true rate is 2.5 times higher than the ‘official’ rate — which itself is frighteningly high. To avoid another Depression, we will need a long-term plan to mobilize investment, directly create jobs, and provide crucial services and infrastructure. We will also need to develop, and regularly report, a credible and more robust measure of labour market slackness. The official unemployment rate was an increasingly misleading indicator of labour market well-being, even before this catastrophe. Now it’s almost irrelevant.

Source: The Star